Court File and Parties

CITATION: Integrated Business Concepts Inc. v. Akagi, 2023 ONSC 1496

DIVISIONAL COURT FILE NO.: 428/22 DATE: 2023-03-06

SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT

RE: INTEGRATED BUSINESS CONCEPTS INC., STUDENT HOUSING CANADA INC. and RV INC., Appellants AND: TRENT AKAGI, TERRY CORSIANOS, J.P. GRACI & ASSOCIATES, JIM PATTERSON, RUTH PROMISLOW and BENNETT JONES LLP, Respondents

BEFORE: Nishikawa J.

COUNSEL: Joshua Samac and Thomas Mathews, for the Appellants Greg Roberts, for the Respondent Trent Akagi John D. Campbell, for the Respondent Terry Corsianos Carlo Di Carlo, for the Respondent J.P. Graci & Associates Peter Kolla and Brittni Tee, for the Respondents Jim Patterson, Ruth Promislow and Bennett Jones LLP

HEARD at Toronto: March 3, 2023 (by videoconference)

ENDORSEMENT

Overview

[1] The Appellants appealed from the order of Associate Justice McGraw, dated June 29, 2022, 2022 ONSC 3889, dismissing the Appellants’ action for delay pursuant to Rule 48.14(7)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[2] At the hearing of the appeal, I dismissed the appeal with reasons to follow.

Analysis

The Applicable Principles

[3] At a status hearing, the decision to dismiss an action for delay is discretionary. Accordingly, on appeal, the decision attracts deference but may be set aside if it discloses palpable and overriding errors of fact or is made on the basis of an erroneous legal principle: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, 112 O.R. (3d) 67, at para. 16.

[4] The onus is on the plaintiff to demonstrate why the action should not be dismissed for delay: Faris v. Eftimovski, 2013 ONCA 360, at para. 32. The test requires that the plaintiff demonstrate: (i) an acceptable explanation for the delay; and (ii) that if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice: Khan v. Sun Life Assurance, 2011 ONCA 650, at para. 1.

Application

[5] The Appellants raised the following grounds of appeal:

(a) The Associate Justice erred in principle in failing to consider certain contextual factors;

(b) The Associate Justice made a palpable and overriding error in finding that the Appellants took no steps in the action until January 21, 2021; and

(c) The Associate Justice made a palpable and overriding error in finding that the Appellants had not made out an absence of prejudice to the Respondents.

[6] The grounds raised by the Appellants do not constitute an error of law or principle. In addition, the Appellants have not demonstrated that the Associate Justice made any palpable and overriding errors of fact.

Contextual factors

[7] On the first issue, the Appellants acknowledge that the Associate Justice applied the correct test, as stated above, but submit that the Associate Justice applied the test in an overly rigid or superficial manner and, as a result, failed to consider four contextual factors. The Appellants submit that this constituted an error in principle. The four contextual factors that the Appellants allege that the AJ failed to consider are as follows:

(i) The severity of the allegations set out in the Statement of Claim and the breadth of pecuniary interests at stake;

(ii) That the Respondents themselves were technically in breach of the Rules;

(iii) That this was the first status hearing in the matter and a “guillotine” order could have been applied; and

(iv) The “obvious and repeated inadvertence of Appellants’ previous counsel to maintain a grip on reality or upon the basic standards of professional conduct.”

[8] At paragraphs 14-19 of the endorsement, the Associate Justice clearly set out the applicable legal principles, including that “[a]lthough the court must be guided by the applicable two-part test, the determination as to whether to allow an action to proceed is discretionary and determining whether it would be unfair for the action to be dismissed requires a consideration of the circumstances and a balancing of the parties’ respective interests[.]” The Associate Justice was thus alive to the ability to consider contextual factors in the exercise of his discretion.

[9] In my view, in arguing that the Associate Justice failed to consider certain contextual factors, the Appellants object to his exercise of discretion to dismiss the action for delay, a discretionary finding to which deference is owed. Moreover, the contextual factors that the court applies at a status hearing depend upon the circumstances of the case and the evidence before the court. Three of the four contextual factors the Appellants now submit that the Associate Justice ought to have considered were not raised before him.

[10] First, the Respondents’ alleged breach of the Rules, technical or otherwise, appears not to have been raised. In any event, on a status hearing under Rule 48, it is the plaintiffs’ conduct that is at issue: 1196158 Ontario Inc. v. 6274013 Canada Ltd., at para. 28. On appeal, the Appellants also argued that the action should not have been dismissed for delay because the Respondents’ notice of cross-motion for a status hearing was filed outside the five-year timeline provided in Rule 48.14(5). That argument was not made before the Associate Justice and I decline consider it. In any event, the Appellants had also filed a notice of motion for a status hearing, which they then withdrew for tactical reasons. Moreover, in my view, it would be contrary to the purpose of Rule 48 to preclude a party from seeking a status hearing when the delay is longer than five years. Rule 48.14(1)1 requires that the Registrar dismiss cases for which the delay is longer than five years. The fact that this did not occur should not preclude parties from availing themselves of Rule 48.14(5).

[11] Second, at the status hearing the Appellants did not put forward a plan for proceeding with the action. In the absence of any plan or commitment on the part of the Appellants, the Associate Justice cannot be faulted for not having ordered a “guillotine order,” deadlines or other terms to permit the action to proceed. The Associate Justice referred to the Appellants’ failure to take any steps to advance the litigation, including bringing a motion to lift the stay of proceedings in favour of the receiver. In view of the lack of steps taken by the Appellants and a plan to proceed, such an order would have been of limited utility.

[12] Third, the Associate Justice could not have considered the alleged lack of competence of the Appellants’ previous counsel, Ronald Chapman, because that it was Mr. Chapman who represented the Appellants at the status hearing. I reject the Appellants’ suggestion that the issue ought to have been clear from the affidavit submitted on the Appellants’ behalf. Any such allegation is undermined by the fact that the Appellants continued to be represented by Mr. Chapman until January 2023, when this appeal was first scheduled to be heard.

[13] Finally, the Appellants rely on Clements v. Greenlaw, [2009] O.J. No. 2688, 2009 33028 (Div. Ct.),[^1] to argue that the Associate Justice ought to have taken into consideration the severity of the allegations, in this case, an alleged $40 million fraud. Clements v. Greenlaw, however, does not refer to the severity of the allegations but to the “merits of the action” (at para. 27). While the Associate Justice did not specifically refer to the merits of the case as a contextual factor, the Associate Justice was alive to the allegations, and the Appellants’ claim for $40 million in damages, which he summarized in para. 8 of his endorsement. The Associate Justice would also have known that the actions taken by the receiver, which formed the basis of the Appellants claims, were pursuant to court order.

Whether the appellants took no steps until January 2021

[14] The Appellants submitted that the Associate Justice erred in finding that the Appellants took no steps to communicate with the Respondents until January 21, 2021, when they retained new counsel in December 2020.

[15] The Associate Justice made no palpable and overriding error in finding that the Appellants had not communicated with the Respondents until January 21, 2021. Even if the Associate Justice had erred, which he did not, the error of one month in the context of a five-year delay is not palpable and overriding such that it would have affected the application of the legal test.

Absence of prejudice

[16] On the final ground of appeal, I find that the Associate Justice made no palpable and overriding error in finding that the Appellants failed to demonstrate that the Respondents would suffer no non-compensable prejudice. In the endorsement, the Associate Justice noted that the Appellants’ evidence on the absence of prejudice was limited to two sentences in their affidavit that the statement of claim was properly served, that any investigation would have been done at that time and that the Respondents did not send any communications asking them to proceed. There was insufficient evidence to rebut the presumption of prejudice from the passage of time. The Appellants provided no evidence as to their own efforts to preserve evidence or the availability of witnesses. It is difficult to see how the Associate Justice could have found differently on the issue of prejudice, given the sparse evidence put forward by the Appellants.

Conclusion

[17] As stated at the conclusion of the hearing of the appeal, the appeal is dismissed.

[18] In the circumstances, the Respondents are entitled to their costs of the appeal on a partial indemnity basis. I heard brief submission on costs at the hearing and have reviewed the parties’ cost outlines. I find that the following amounts, payable by the Appellants to the Respondents, are fair and proportionate, having regard to the relevant factors and circumstances:

• Ruth Promislow, Jim Patterson and Bennett Jones LLP - $14,000 • J.P. Graci - $10,000 • Terry Corsianos - $7,000 • Trent Akagi - $4,000

[19] For greater clarity, the above amounts do not include costs thrown away, as previously ordered, for the hearing that was adjourned in January 2023.

“Nishikawa J.”

Date: March 6, 2023

[^1]: It is also worth noting that in Oberding v. Sun Life Financial, 2010 ONSC 3303, at para. 16, this court found that the approach to status hearings adopted in Clements v. Greenlaw was not in line with the most recent authorities.